What You Shouldn’t Do When Buying Gold

30 August 2019

Whether you are new to the gold market or contemplating an initial purchase you probably have concerns about getting it right.  Anything new can make us feel nervous, especial when it has to do with our money.  After all, if you get it wrong you haven’t just made a mistake, you have lost capital.  At Guildhall, we see a lot of simple mistakes that new (and even seasoned) precious metals investors make which can often end up costing them unnecessarily.  Many of these mistakes has to do with overall mindset.  So to help you get off on the right foot here is a list of six gold and silver investing don’ts.  Avoid these common mistakes and you will be well on your way to profiting from the amazing opportunities in the precious metals market.

1) Do not worry about price.

It is easy to get caught up in the costs. There is the exchange, fabrication, dealer premiums etc. and it all starts to feel like owning gold is not worth the money. This is self defeating. Gold will overcome costs of doing business the longer you hold it. The best place to get to as an gold owner is when you think about how many ounces you own rather than what it costs to buy.  Also, prices are pretty standard in the gold market. So, as long as you buy from a reputable firm you can be pretty sure you are getting fair value.

2) Do not buy all at once.

We see this all the time at Guildhall, clients putting undo pressure on themselves because they want to get into the market and they want to be right about the price.  There is a lot of ego built into being right which seems like it is somehow a reflection of intelligence.   In the end it is just a guess.  If you acquire gold incrementally you avoid trying to guess the market. You will also be able to cost average and build the position over time. 

3) Do not buy paper.

There are many “convenient” options out there in the gold market; ETFs, certificates, gold backed funds, pool accounts etc. None of these put real gold in your hand.  It is ironic that in such a materialistic world where people have lockers full of “stuff” when it comes to investments they somehow what it to be invisible.  Follow the motto “If you can’t hold it, you don’t own it”.  One of the major reasons to own gold is it has zero counter-party risk.  If you own paper what you really own is.. well, paper, which is a contract, which is the essence of counter-party risk.

4) Do not watch the price everyday.

As soon as you purchase there is an undeniable wish that gold moon shoots.  Watching and wishing only makes the waiting harder. Keep an eye on price sure, but do not feel compelled to watch the price of gold daily.  It will likely only frustrate you.  As the saying go, a watched pot never boils.

5) Do not think short term.

Gold and silver will have its ups and downs, but the long term trend is up. The best feeling is waking up one day and realizing what you once paid for your gold pales in comparison to the current value.  Long term gold beats inflation and is one of the best hedges to traditional portfolios as it is a negatively correlated asset.  You can’t get there in a few days or even a few months. By constantly holding gold as part of your portfolio will demonstrate long term what a strategic asset it really is.